Who in the energy sector might benefit if Mexico opens up?

By Myra Saefong

Mexican President Enrique Pena Nieto recently presented a bill to the nation’s congress proposing to open Mexico’s energy sector to private investment — effectively for the first time since 1938 when then-President Lazaro Cardenas nationalized the sector.

So what might happen if Mexico allows foreign investment in its energy sector?

“An opening up of the Mexico upstream would further cement the Americas as the most important source of supply growth in years to come,” said UBS analysts, led by Angie Sedita, in a note dated Monday.

From the services side, the opening of Mexico could be “extremely important,” they said. “The large oil companies would again tap into the expertise of both the oil service and contract drilling companies to partner and meet their production targets.”

And ultimately, Mexico could become a “sizeable market for the U.S. oil-service companies as well as the offshore drillers, the analysts said.

Bloomberg News

The process of opening up Mexico’s energy sector could easily take 2 to 3 years — in order for the region to develop, for oil laws to be put into place and for oil service companies to be awarded contracts among other things, the UBS analysts said.

But given the even longer lead times towards production, the oilfield services sector is likely to be the biggest immediate beneficiary of new access and a step up in activity, they said.

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